2- Refer to Table 5–5 https://ezto-cf-media.mheducation.com/Media/Connect_Produc

Question

2-  Refer to Table 5–5

https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/Saunders_7e/chapter05/Table%205-5.jpg

a. T-bill ask price b. T-bill bid price Monday, May 16, 2016 Treasury bill bid and ask datn are representative over-the-counter quotations as of 3 p.au. Eastern time quoted as a discount to face value. Treasury bill yields are to naturity and based on the asked quote. 0.168 0.173 0.203 0.195 0.193 0.203 0210 0.208 0.215 0.158 0.163 0.193 0.185 0.183 0.193 Asked Yield 0.160 0.165 0.196 0.188 0.186 0.196 V19%2016 526/2016 6/16/2016 232016 6/30/2016 7/2016 /14/2016 /21/2016 /23/2016 4/2016 81122016 /13/2016 825/2016 91/2016 -0.010 -0.010 -0.015 0.198 0.201 0.205 0.245 0.255 0255 0 255 0.265 0258 0.245 0.245 0.255 0249 -0018 0.249 0.005 9/15/2016 0 263 0003 0257 922/2016 0278 .272 0.270 0.293 0.298 0.313 0.310 0.328 0.335 0.340 -0013 -0013 -0005 0.297 0.303 0.317 0.315 10/6/2016 10/13/2016 10202016 10/27/2016 11/32016 11/10/2016 1282016 /5/2017 2/2/2017 322017 302017 0.308 0.320 -0025 0.341 0428 0.460 0485 0.523 -0.005 -0.005 0.003 -0010 0013 -0010 0.418 0.450 0.458 0.513 0.522

Explanation / Answer

For this question, we are assuming maturity value of $10,000.

Bid/ask price of t-bill = Maturity Price - [ Bid/ask * number of days left until maturity / 360 ]

Part a.

For September 29, 2016, the ask represents the interest rate the seller of a T-bill is willing to pay. It is 0.27%, and hence the ask is $10,000 * 0.27/100 = $27

We need the days to maturity, that is the number of days between May 16th and September 29th, or 136 days.

Therefore,

Ask Price = 10,000- [27 * 136/360] = 1,000 - 10.2 = $9,989.8 (Answer)

Part b.

For June 16, 2016, the bid is 0.193% or $10,000 * 0.193/100 = $19.3

The number of days until maturity, or days between June 16 and May 16 is 31 days

Therefore, Bid Price = $10,000 - [ 19.3 * 31/360 ] = $9,998.34 (Answer)

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.